Entry deterrence under scope economies

Resumo/Abstract: In this paper we develop a model where the incumbent may expand to a second market so as to signal the existence of scope economies and deter potential entry. We show that the incumbent only expands to another market when scope economies are large enough. Thus expansion is indeed a signal of larger economies of scope and for certain parameter values it leads to entry deterrence. We characterize the unique PBE for the various parameter values and show that the PBE may involve accommodation, entry deterrence or a mixed strategy equilibrium.

Outros seminários / Other seminars: Programa completo / Full programme.